§ Statement of Purpose

The View from 1776 presents a framework to understand present-day issues from the viewpoint of the colonists who fought for American independence in 1776 and wrote the Constitution in 1787. Knowing and preserving those understandings, what might be called the unwritten constitution of our nation, is vital to preserving constitutional government. Without them, the bare words of the Constitution are just a Rorschach ink-blot that politicians, educators, and judges can interpret to mean anything they wish.

"We have no government armed with the power capable of contending with human passions, unbridled by morality and true religion. Our constitution is made only for a moral and religious people. It is wholly inadequate to the government of any other." John Adams, to the Officers of the First Brigade, Third Division, Massachusetts Militia, October 11, 1798.

§ American Traditions

§ People and Ideas

§ Decline of Western Civilization: a Snapshot

§ Books to Read

§ BUY MY BOOK

Tuesday, August 03, 2010

Is The Fed’s Monetary Policy Nearing an End?

New Deal, Keynesian theory justifies collectivizing all political power at the Federal level by supposing that the Federal government and the Federal Reserve can manage the entire economy as if it were a two-dimensional board game.

The two main tools with which the government and the central bank presume to do so are fiscal policy (the domain of Congress and the executive branch) and monetary policy (the domain of the Federal Reserve).

Fiscal policy is government spending such as Obama’s stimulus program, cash-for-clunkers, bonuses for home purchases, and TARP. The only real product, in the end, is a much enlarged Federal deficit and an increased Federal debt that tends to crowd private businesses out of the bond and equity markets. None of Obama’s fiscal policy initiatives has worked so far, but a further, vast increase in such spending is the recommendation of Paul Krugman and his fellow liberal-progressive-socialists.

Monetary policy is reducing interest rates by flooding the market with large amounts of surplus (and depreciating) fiat money. Underlying such action, as well as fiscal policy spending, is the Keynesian assumption that human beings - individuals or private businesses - react mechanically by rushing out to spend Federal largesse or that businesses and individuals will automatically borrow more of the Fed’s increased supply of fiat money to buy things. Thereby, according to Keynesian theory, the government and the central bankers can manipulate the economy as if it were a checkers game.